What Is TLC In Real Estate And What Does It Mean For Buyers?

It’s common for house hunters to come across listings where the home being listed could use some work. With some homes, you’ll know it just by looking at the photos within the listing. With other houses, the description will come right out and say that the house “needs TLC,” otherwise known as “tender loving care.” But, more specifically speaking, what does TLC mean in real estate? And what should you know before buying this type of house?

Find the answers here.

What Does TLC Mean In Real Estate?

When a house needs tender loving care, or “TLC,” it means that it requires renovations of some variety. However, real estate listings that mention needing TLC may not state the exact degree to which a house needs updating. If that’s the case, it’s crucial for a prospective home buyer to find out what the seller means by “TLC” – especially for the sake of their budget.

Some buyers appreciate the appeal of a fixer-upper, but cosmetic and structural updates vary drastically in cost. So, even though you can assume a TLC house will require a renovation budget, the term “TLC” can be vague, which poses risks for buyers. On the other hand, transparency concerning these repairs can make buyers feel more comfortable about making a home purchase.

Pros And Cons Of TLC Houses

Considering a TLC house? As with any fixer-upper, you’ll need to understand the advantages and disadvantages of buying a TLC home.

Pros

These are some of the benefits associated with buying a house that needs some TLC:

• Profit potential: If you’re able to make the necessary renovations, you’ll increase the value of the home. By doing so, you could sell the house years later for considerably more than you paid for it, or you could flip it or rent it out for passive income.
• The opportunity to personalize: A house that needs TLC presents a wonderful opportunity to customize the design and style to your liking. Updates that have already been made may reflect the previous owner’s aesthetic, which may not be your preference.
• Typically, a lower asking price: Homes needing TLC usually have a significantly lower asking price than move-in ready homes. If not, you should be able to negotiate down on the asking price to account for required repairs. 

Cons

Buyers must likewise be aware of these potential downsides of buying a TLC home:

• Multiple interpretations: What’s implied by “TLC” can vary dramatically among sellers. One TLC house might just need fresh paint while another house with the same label needs an entirely new kitchen and major renovations to the bathrooms. Buyers can also interpret “TLC” differently, which makes buying a TLC home extra risky.
• A time-consuming process: Depending on the number of necessary upgrades and the nature of those upgrades, they could take a lot of time to complete even if you hire a professional. If you’re hoping to move into the house soon, it may not happen if TLC repairs slow down the process.
• Certain skills being required: If you don’t have contractor skills, you’ll likely have to spend extra money to hire a professional. This means shelling out more cash than you would if you opted to DIY some projects.
• Financing difficulties: It can be harder to get financing on a home that calls for major improvements. Some loans have strict property requirements that a TLC house won’t meet. Also, lenders typically won’t approve you for a loan that’s for more than the home is worth, so the house will need to be priced at or lower than its value.

5 Tips For Buying TLC Houses

If the pros outweigh the cons and you’re ready to buy a home that needs some TLC, you’ll want to keep some special considerations in mind. Here are some tips that should make the home buying process for a TLC house easier:

1. See The House In Person

When an online listing includes verbiage about how the home “needs some TLC,” you need to know what exactly the TLC is. And, sometimes, the only way to find out is to see the house for yourself. That means an in-person visit to the property.

When you walk through a house, you’ll see whether it needs some new paint or hardware, or if it’s in worse condition than you expected. For example, you can personally observe any water damage or a sloping floor that could signal the need for a costly fix. If possible, bring your real estate agent or licensed REALTOR^® along so they can help you understand what to look for.

2. Get A Home Inspection

A professional home inspection is a buyer’s best bet for identifying issues that require TLC. A home inspector will check features of the home such as its siding, roof and drainage patterns on the exterior. On the interior, an inspector will often check the home’s major systems, such as the HVAC and plumbing.

Any concerns that the inspector brings to light will help you decide whether it’s wise to make an offer, and how much to offer if you choose to move forward. You may even be able to accompany the inspector during the process, which can help guide your decision and give you more clarity.

3. Explore Financing Options Fit For TLC Houses

A number of financing options are available for fixer-uppers, and these options go beyond the most common home loans. For major renovations, consider one of these home improvement loans, which are lesser known:

• FHA 203(k) loan: This government-insured loan provides an opportunity for buyers to purchase a home that needs renovations. The loan is designed to account for the home’s purchase price plus renovation costs. As a result, you won’t have to pay closing costs on two separate loans.
• FHA Title I Property Improvement loan: This loan backed by the Department of Housing and Urban Development (HUD) can be used for renovations that will make your house more livable. The maximum Title I loan amount is $25,000 for a single-family home.
• Fannie Mae’s HomeStyle^® Renovation loan: This financing option for conventional loan borrowers is flexible with regard to renovations that qualify, but requirements are generally stricter than the requirements with FHA-insured loans.
• Freddie Mac’s CHOICERenovation^® mortgage: Similar to a HomeStyle^® loan, this is a flexible form of financing for buyers using a conventional loan to buy a TLC home and improve it.

It's important to note that many lenders, including our friends at Rocket Mortgage^®, don't offer renovation loan options. It's worth having a conversation with lenders about which option is right for you. These renovation loans require several extra steps during the qualification process.

4. Be Strategic With Your Offer

If your inspector identifies approximately $10,000 in renovations, you may want to deduct that amount from your offer. However, it’s possible the renovation costs were factored into the asking price, which is common with houses needing TLC. In this case, a seller might not entertain a lower offer. In any case, a lower offer won’t be as competitive.

An alternative strategy is to request that the seller complete the repairs so you can avoid renovation costs altogether. Making your offer contingent upon the seller completing repairs can take some of the cost and work off your shoulders. But sellers who want a quick and easy sale will likely pass on this option. Work with your real estate agent to craft the right offer in light of the circumstances.

5. Consider Putting In Some Sweat Equity

Sweat equity is the time and effort a homeowner devotes to renovating their property. By doing the work yourself, you’ll save on labor costs you would’ve spent on a professional contractor. If you lack the skills, hiring a professional contractor can be worth the cost. But if you’re able to DIY the TLC, you’ll reap the financial benefits and perhaps feel a sense of accomplishment and pride.

FAQs About TLC’s Meaning In Real Estate

Use the answers to these frequently asked questions to learn more about the meaning of TLC in real estate:

Is a TLC home the same as an as-is home?

No. When a home is sold as-is, it means the seller is unwilling to make repairs to the house before selling. The seller of a TLC home may still be willing to make repairs since they didn’t list the home as-is.

What amount of house TLC should sellers put in before selling?

Most sellers want to make as much money as possible and spend as little as possible, and renovating costs them money. However, some home improvements add value, which can help  a seller’s chances of getting more money for their house. Sellers may especially want to renovate obvious flaws that might turn buyers away. But even if sellers don’t make renovations, they may still get enticing offers from real estate investors.

When is a TLC house worth it?

If you can clearly identify the TLC a home needs, fund it and complete it, buying a TLC home can be worth it. However, if the house is overpriced for the repairs you need to fund or the repairs are too costly, it may not be worth buying a TLC house. Lean on your real estate agent’s resources and experience to make an informed decision.

The Bottom Line

“Tender loving care,” or TLC, is a subjective term in the real estate industry. It can mean something different to buyers and sellers, but it always means the buyer will need to make at least a few updates. Putting some TLC into a house can be financially and emotionally rewarding, but TLC homes aren’t always worth the time, effort and money you’ll spend on upgrades. Buyers should do their due diligence and work with a real estate agent to determine if the minimum amount of TLC is a worthy investment and within their budget.

If you find a house in need of TLC, it’s critical to lean on your agent. Rocket Homes℠ can match you with an agent who can help you find the right house and make a winning offer.